[Goodnews1]

Hi,

I’m a U.S. citizen living in Asia. My wife (a non-U.S. citizen) is starting to invest in real estate. Will I owe U.S. taxes if…

1. She owns the business?
2. She uses her own money?
3. She uses my money?
4. She owns the property titles?
5. She owns the bank account?
6. She creates a trust or foundation?
7. I do the marketing/advertising? (Does she have to pay me a salary taxable in U.S.? If so, how much salary for part-time work?)

Are there any other strategies you know for helping me minimize U.S. taxes?

Thank you for your help,
Greg

 

[BBCWatcher]

The short answer is no. Moreover, I'm not aware of any U.S. requirement that she pay you for your services.

Note that you are limited in how much funding you can provide your non-resident alien wife before U.S. gift reporting (and potentially gift tax) applies. The limit is on the order of $140,000 per year, though the exact limit increases each year. Household, medical, and educational expenses that you pay are generally exempted from this limit. Also, I am assuming you file a Married Filing Separately (or Head of Household, if qualified) tax return, that she does not elect to file Married Filing Jointly with you. To that extent your U.S. tax situation is impacted -- MFJ is generally a more favorable filing status than MFS or HoH.

As long as you follow the rules carefully a non-resident alien spouse can serve as a tax avoidance vehicle. You might also love your spouse, hopefully.

 

[Bevdeforges]

As long as the investment/business is solely in your wife's name and you're filing your US taxes as "married, filing separately" there should be no problem.

If you hold a stake in her business, you may become subject to various reporting requirements - but that depends on the type of business and your stake in it. (Technically, anything above 10% if the business falls into the category of "certain foreign corporations" - and how that is defined is a marvel of legislative linguistics - see form 5471.)

Actually, she can pay you a salary, no problem, as long as whatever she pays you is reasonable for the actual services you are providing to the business. You'd report the salary and then take either the FTC or the FEIE against it on your US returns.

If you are a signer on the business bank accounts, you'd report them on your FinCEN/FBAR, but in that bizarre category of "having signature authority but no financial interest" - however in that category, you just report the name and address of the employer and no need to provide much more in the way of details.
Cheers,
Bev

 

[BBCWatcher]

I do not recommend any form of financial commingling, though, if you and your wife take this approach to tax avoidance. That includes having your name on business bank accounts and company registration documents, as examples. This needs to be 100% hers, de facto and de jure, so that ownership is unquestionably hers alone (or hers and other owners not you).

Congress (and the IRS) recognized a long time ago that non-resident alien spouses can be very useful U.S. tax avoidance vehicles, so I simply recommend keeping very clean separation if your wife heads down that path.

I should pose a question: have you planned for the possibility that your wife predeceases you? Presumably you would inherit her business, but if you're concerned about U.S. tax and financial reporting obligations, there may be better ways than others to structure and prepare for that possible inheritance. I'll just toss out that idea for you to ponder and get your reaction.

As another question, are there things you can do for the household that are foreign tax-advantaged because you are a U.S. citizen? Maybe so. I'd ponder that idea, too. This can cut both ways. (Yes, my spouse is an NRA spouse, too.)